1. The existence of audit risk is recognized by the
To exercise due professional care, an auditor
statement in the auditor's standard report that
the:
Auditor obtains reasonable assurance about
whether the financial statements are free of material
misstatements.
Auditor is responsible for expressing an opinion on
the financial statements, which are the responsibility of
management.
Financial statements are presented fairly, in all
material respects, in conformity with GAAP.
Audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.
2. An "integrated audit" includes:
A special audit related to management fraud.
A financial statement audit and an audit of internal
control over financial reporting.
A financial statement audit and a special audit
related to management fraud.
A special audit related to management fraud and
an audit of internal control over financial reporting.
3. Which of the following factors would an auditor
least likely consider when assessing
theinherent risk associated with client sales
transactions?
Billings are made using the percentage-of-
completion method of revenue recognition.
The nature of the credit authorization process.
Some invoices are normally billed prior to
shipments [which occur at a later date].
The conditions of the sale allow for a right of return
or the right to modify the purchase agreement.
4. Which of the following best describes the roles
of the AICPA and the PCAOB in establishing
auditing standards?
Auditing standards issued by the AICPA and the
PCAOB are considered minimum standards of
performance for auditors.
The AICPA sets auditing standards for use in
audits of non-public entities.
The PCAOB sets auditing standards for use in
audits of publicly held companies.
All of the above.
5.
should:
Attain the proper balance of professional
experience and formal education.
Critically review the work performed and judgment
exercised by those assisting in the audit.
Examine all available corroborating evidence
supporting management's assertions.
Design the audit to detect all instances of illegal
acts
6. An auditor's evaluation of the reasonableness of
a client's loan loss reserve would normally be
made during which phase of the audit?
Gaining an understanding of the client's industry.
Client acceptance/pre-planning.
Consideration of internal control systems.
Auditing business processes and related accounts
1. If, after obtaining an initial understanding of a client's
internal control, the auditor wishes to further reduce the
assessed level of control risk relating to plant asset
transactions, the auditor should next
a. Make extensive substantive tests of plant asset balances.
b. Establish the physical existence of current year additions.
c. Complete the plant asset section of the internal accounting
control questionnaire.
d. Further test those internal control procedures relating to
processing and recording plant asset transactions.
ANSWER: D
2. Auditors frequently use flowcharts in connection with
whichof the following
a. Preparation of generalized computer audit programs.
b. Review of the client's internal control procedures.
c. Use of statistical sampling in performing an audit.
d. Performance of analytical review procedures ofaccount
balances.
ANSWER: B